Dividends from central public sector enterprises (PSUs) are poised to surpass the government’s budgeted target of ₹56,000 crore for 2024-25, underscoring their growing role as a critical revenue source amid sluggish disinvestment proceeds.

Data shows that PSUs have already contributed ₹48,376 crore, or 86 per cent of the annual target, as of January. Officials predict dividend receipts will surpass ₹60,000 crore for the second consecutive fiscal year, buoyed by strong performance in energy, petroleum, coal and mining sectors.

In 2023-24, dividends reached a record ₹63,749 crore, significantly higher than the budget estimate of ₹50,000 crore. Dividends from top contributors included Coal India Ltd (₹8,073 crore), Oil and Natural Gas Corporation (₹6,298 crore), Indian Oil Corporation (₹5,091 crore), and Telecommunications Consultants India (₹3,762 crore).

The government’s revised dividend policy mandates PSUs to pay a minimum annual dividend of 30 per cent of profit after tax (PAT) or 4 per cent of net worth, whichever is higher. This ensures steady revenue from state-owned firms. Non-banking financial companies (NBFCs) among PSUs are also required to meet this benchmark, subject to legal provisions.

“CPSEs are encouraged to exceed the minimum dividend benchmark, considering factors like profitability, capital expenditure needs, and cash reserves,” according to the updated guidelines.

Higher dividends are expected to help the government manage its fiscal deficit, pegged at 4.9 per cent of GDP for FY25, down from 5.1 per cent in the interim budget. This comes alongside a ₹2.11 trillion dividend from the Reserve Bank of India (RBI), exceeding the budget’s estimate of ₹80,000–₹90,000 crore.

In contrast, proceeds from disinvestment remain muted, with only ₹8,625 crore realised so far in FY25, far below expectations. The Budget has projected ₹50,000 crore in “miscellaneous capital receipts” from disinvestment and asset monetization for the fiscal year.

Aditi Nayar, chief economist, Icra said “the anticipated miss in the capex target is expected to offset any shortfall on account of disinvestment and taxes, as well as the impact of the recent supplementary demand for grants. Accordingly, Icra expects the fiscal deficit to mildly trail the 2024-25 RBE (revised budget estimate) of ₹16.1 trillion or 4.9 per cent of GDP.”

The robust performance of PSUs is evident across sectors, particularly oil, coal and power, which are expected to remain top dividend contributors. Factors such as stable fuel prices, removal of windfall taxes on petroleum exports and increased demand due to prolonged heatwaves have bolstered profitability in these sectors.

According to the Public Enterprises Survey, 212 of India’s 272 operational CPSEs reported a combined net profit of ₹3.43 lakh crore in 2023-24, a 48 per cent increase from ₹2.18 lakh crore in 2022-23. Dividends declared by these CPSEs rose 16 per cent, from ₹1.05 lakh crore in 2022-23 to ₹1.23 lakh crore in 2023-24.